Metro Vancouver neighbourhood pubs: Some falter, some thrive in a fast-changing market

Bruce Constantineau, vancouver sun08.23.2013

Brian Riedlinger , owner of Sailor Hagar’s Brew Pub in North Vancouver: “The government allowed this pub industry to flourish and develop, but by changing the liquor laws, they have almost destroyed it.”Jason Payne
/ VANCOUVER SUN

Jeff Donnelly out front of his New Oxford Pub in Vancouver: “Sometimes when a restaurant opens up, it’s so obvious that it’s going to act as a pub. They should probably just apply for the proper licensing.”Steve Bosch
/ PNG

Jeff Donnelly out front of his New Oxford Pub in Vancouver: “Sometimes when a restaurant opens up, it’s so obvious that it’s going to act as a pub. They should probably just apply for the proper licensing.”Steve Bosch
/ PNG

The proprietor of Sailor Hagar’s Brew Pub in North Vancouver notes that at least half a dozen nearby restaurants have lounges that many people would mistake for a typical pub or bar.

“They have lounges where people can go in and drink without eating food,” Riedlinger said. “That’s direct competition. The government allowed this pub industry to flourish and develop, but by changing the liquor laws, they have almost destroyed it.”

Neighbourhood pubs were akin to licences to print money when they were introduced by the B.C. NDP government in the mid-1970s because they were seen as a significant step up from the massive, drab beer parlours that dominated the industry at the time.

But the original rules that created the industry have changed, and now pubs aren’t considered all that unique by consumers with a penchant for craft beer and gourmet food.

Many B.C. restaurants now operate lounges — where people can drink without ordering food — that can accommodate up to 40 people, depending on the restaurant’s total capacity.

The liberalized rules and stronger drinking-and-driving penalties introduced three years ago are often cited as major detriments to the long-term survival of Metro Vancouver’s neighbourhood pubs.

Riedlinger, whose family opened Sailor Hagar’s in 1986, said the pub would be out of business if it wasn’t for the revenues generated by his adjacent beer and wine store.

“The pub operation used to be the strong part of the business and the liquor store was just an add-on,” he said. “But now that situation has reversed, and almost every other pub owner I talk to says the same thing. If they didn’t have the (licensee retail store), they couldn’t keep their pubs open.”

Sailor Hagar’s used to brew its own unique beer on site, but contracted that work out to Howe Sound Brewery so it could use its brewery space to create a larger liquor store.

“As pubs lose revenue, they can’t afford the upkeep. And if they can’t afford the upkeep, customers don’t want to come in,” he said. “If this keeps going on, the industry eventually just dies.”

But it is not all doom and gloom in the pub sector. The number of Metro Vancouver pubs has increased slightly from 55 to 60 in the past five years, and some multi-pub operators appear to be thriving.

Donnelly Group founder Jeff Donnelly plans to open his 12th Vancouver pub — The Blackbird — at the corner of Hornby and Dunsmuir next month. Like many of his operations, it will be a hybrid facility with a “liquor-primary” pub licence upstairs and a “food-primary” restaurant licence downstairs.

Donnelly clearly prefers to operate urban pubs because he has yet to open anything outside the city of Vancouver. He admits he “got lucky” by having urban pubs close to transit routes when the province brought in stricter drinking-and-driving rules, which discouraged people from driving to many suburban pubs.

“There’s a built-in market with all the residential construction going on in Vancouver now,” Donnelly said. “It’s also easier to run my businesses because they are all so close together.”

He feels Gastown and Yaletown are among the strongest areas for city pubs now, while the central business district has lost a few pubs in recent years and some suburban operations still suffer from the stricter drinking-and-driving rules.

Donnelly said pub owners upset with what they consider to be unfair competition from restaurants have a valid point.

“Sometimes when a restaurant opens up, it’s so obvious that it’s going to act as a pub,” he said. “They should probably just apply for the proper licensing.”

But it can be an expensive and time-consuming process to obtain a new liquor-primary pub licence — taking up to 12 months and costing as much as $200,000 by the time you pay consultants, survey area residents and pay rent on a site you can’t even use for a year.

Also, Vancouver has put a hold on new liquor-primary licences in certain parts of the city — including Gastown and the Granville entertainment corridor — while it reviews city policy.

Donnelly said it is much cheaper and takes a lot less time to obtain a food-primary restaurant licence.

That probably encourages some restaurant operators to chase pub business with a food-primary licence.

“That’s probably a little unfair, but it brings in more competition and forces pub owners to try a little harder,” Donnelly said.

B.C. Restaurant & Foodservices Association president Ian Tostenson feels it is unfair to blame restaurants in general for blurring the lines between restaurants and pubs, but he acknowledges a few restaurant operators have pushed the limits of their food-primary licences.

“There are some cases where food-primary people have taken some liberties and we, as an association, think that’s completely offside,” he said. “Most restaurants don’t want to do that, but they do want customers to have the ability to come in for a glass of wine and not have to eat something.”

Tostenson said under current rules, children can’t enter pubs, but suggested that some hospitality industry leaders feel that might change in the future.

“That would make them a little bit more like restaurants, and that’s cool,” he said. “Down the road, there will be very little distinction between a place that serves food and alcohol — whether it’s a pub or a restaurant.”

Steamworks Brew Pub owner Eli Gershkovitch, who also operates three Rogue restaurants in Vancouver, said a neighbourhood pub licence clearly isn’t the valuable asset it used to be when he opened Steamworks in the mid-1990s.

“Now, a neighbourhood pub is a business like any other, and it really depends more on the abilities of the operator and less upon the exclusivity of the licence,” he said.

Steamworks’ original pub licence limited the operation to just 60 seats, but pub expansion and the addition of restaurant licences has increased the operation to 754 seats. Food sales now outpace liquor sales at the Gastown pub.

Donnelly said pub owners have to increase the quality of their food offerings to survive in the current business climate.

“I don’t think any of the original neighbourhood pub owners would assume guys like us would have executive chefs, development chefs and offsite test kitchens,” he said. “There’s such a density of really good casual restaurants in B.C. and we have to keep up with them.”

Gillnetter Pub owner Sandy Billing said his Port Coquitlam operation suffered a 20-per-cent drop in business when the new drinking-and-driving laws were introduced because the Gillnetter is a destination pub without a significant residential population nearby.

“That business is just now starting to come back as people learn to drink less and be more responsible by having designated drivers,” he said.

Billing said his pub has always had a big focus on food, and food sales now represent more than 50 per cent of total pub revenues.

“If you offer a really good product with good service at a reasonable price, you should be able to succeed unless too many people are doing the same thing,” he said.

Black Bear Pub owner Ron Slinger said neighbourhood residents account for about half the business at his North Vancouver pub, and he has tried to make it more convenient for non-locals to visit by having a nearby taxi stand and by allowing customers to park their cars overnight if they feel they have had too much to drink.

He also offers 22 craft beers on tap for discerning beer drinkers who refuse to consume mass-market lagers.

Alibi Room co-owner Nigel Springthorpe, who operates one of the most successful craft beer outlets in Vancouver with a food-primary licence, said Vancouver is a very fickle market. He says the city’s consumers are spoiled.

“There’s always something around the corner coming that’s new and exciting, so I’m always trying to think of ways to stay relevant — and that goes for the kitchen as well,” he said. “If we started to slow down, I’d ask myself what we’re doing wrong and try to fix it.”

Rick Green, a craft beer enthusiast and president of the Campaign for Real Ale Society of B.C., said the most successful neighbourhood pubs in Metro Vancouver have evolved from being “a single, retired male’s living room” to being something that appeals to everybody.

“The ones that don’t understand how things are changing will die off and somebody will probably buy them out to get their licence,” he said.

Alliance of Beverage Licensees executive director Ian Baillie said there has been significant consolidation in the pub industry, but the imminent death of neighbourhood pubs has been greatly exaggerated.

“The whole industry is evolving,” he said. “It’s not dead, but it’s definitely in transition.”

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Metro Vancouver neighbourhood pubs: Some falter, some thrive in a fast-changing market

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